6 Reasons Why Filipinos Don’t Start a Business in the Philippines

Apr 21, 2013 by at Business

strawberry businessDoing business in the Philippines could be good for Filipinos as it offers unlimited income opportunities and it could be the key to achieving their dream of being rich and wealthy. Businesses and enterprises, whether small or big, could also provide more jobs for many Filipinos, reduce the unemployment rate in the country, and help our economy to grow. However, starting a business in the Philippines isn’t easy and operating it could be harder than you think.

In order to succeed in business and achieve your goals in life, you have to overcome all the big challenges waiting for you when you become a businessman or an entrepreneur. Many Filipinos have failed to start their business because of many reasons. Some of those are the following 6 reasons why Filipinos are discouraged to do business in the Philippines:

 

1. Business registration and licensing processes are inconvenient. Many aspiring entrepreneurs, especially those who want to start a small business, are discouraged by the several processes of acquiring business registration and licenses in the Philippines. Of course, if you have enough money to spend, you can just hire a professional or a professional firm to delegate these tasks. However, for small business starters, these registration procedures can be costly in terms of money and time. To duly register a business, you have to undergo the registration processes from the DTI, SEC (for partnership and corporation) Mayor’s Office, BIR, SSS, PhilHealth, Pag-ibig, and other government offices your business is required to comply.

The government has already introduced a one-stop-shop business registration system in the Philippines to solve the problem. However, the system is only available in the few cities of Metro Manila but not yet available in other parts of the country.

 

2. Taxation system in the Philippines is a hassle.  Tax is a burden, but taxes are the lifeblood of our country, and everyone should pay their tax dues to the government whether they are employees, professionals, and business owners. It’s not actually the payment of taxes that discouraged Filipino business owners, but it is the burdensome procedures that most small business owners can hardly comply of. Small business owners usually can’t afford to hire a bookkeeper or accountant to help them comply with all the accounting and taxation requirements of the BIR. Consequently, instead of starting a business, they just stick into employment where their income tax can directly be withheld by their employers and remit it to the government.

 

3. Employment offers a more secure income. Doing business may give you unlimited income opportunities, but that takes time. During the starting year or years of operating a business, losses are ordinarily suffered by business owners. And if you don’t have a clear business plan or strategy, you might just continue on losing. On the other hand, when you are hired as an employee and you got a nice job with your employer, you receive a fixed salary regardless of the financial condition or performance of your company. You do not share on the business losses incurred by your employer.

 

4. They lack financial capital to start their business. Professionals may start a service firm in the Philippines without investing money on purchasing inventories since, as service providers, they are already the products themselves. But not all entrepreneurs are service providers. Most of them want to enter into merchandising and manufacturing businesses. And without the capital to acquire the machinery and equipment needed to manufacture products or the fund to acquire their merchandise to sell, they can’t go into business.

Some aspiring entrepreneurs also don’t have properties they can use as collateral to obtain loans from banks and other financial institutions. Consequently, they stop their plan of going into business. Some Filipinos decide to work abroad just to save more money they can use for a business startup, thereby suspending their plan to start a business now.

 

5. They lack the skills and experience to manage a business. Putting our money in our own business is perhaps the riskiest investment we can make, especially if we don’t know how to handle a business. It is riskier than investing our money in a mutual fund or in the stock exchange where businesses are managed by seasoned experts and professionals. Thus, many Filipinos, especially those who don’t have the required knowledge, discipline, and passion for entrepreneurship, don’t attempt to enter into business.

 

6. They can’t get the support they need from the people around them. Finally, many Filipinos are discouraged to do business because they are discouraged by people who surround them. These people include their family members, friends and even the society. Unfortunately, the business culture in the Philippines is not that strong compare to other countries. Many Filipinos are more attracted with the fixed and secure salaries offered by employment. Only few are really passionate and ready to take the difficult challenges in business. There are also many Filipino parents who want to see their children securely employed in a company rather than seeing them trying hard to establish a business.

 

Final thoughts

The Philippine government and our leaders should do their best to promote business and entrepreneurship in the Philippines. Small and medium business owners may not be considered as heroes of our nation despite of all the sacrifices they made to contribute to the growth of our country, but they need some attention to gain support and hear their voice. Our government should do something significant to lessen those things that discourage them in establishing their enterprise on their homeland. Our society should also realize that our aspiring Filipino entrepreneurs, who are passionate to help our country grow, needs more support rather than discouragement.

Victorino Abrugar is the founder and chief writer of BusinessTips.Ph. Vic is a social media enthusiast who loves to share his knowledge and insights through blogging. He provides business coaching to aspiring small business owners and entrepreneurs to help them reach their business and life's goals. Follow him on Twitter at @viclogic or interact with him on Facebook.

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6 Comments

  1. Lady clare

    Yup I agree It’s a hassle to get these documents especially at BIR and Local government, years already passed and I’ve seen little improvement on these government agencies…

    • Thanks Lady Clare for your comment. Actually, the government through the DTI has already come up with the one-stop-shop business registration. However, it is only available to a few cities in Metro Manila, like Makati. The rest of the country is still facing the culprit of long, tiring and costly processes of business registration.

  2. kris

    Good article and your points are 100% accurate. Im an expat here in Manila but im from the UK. I own a business in the UK and a 25% owner of a philippine business.

    Man! its crazy here in the Philippines, i feel so sorry for filipinos when it comes to government and doing business, its a NIGHTMARE HERE! It is changing and getting better but there’s a long way to go. BIR are a bunch of money grabbers, instead of being grateful to the people who are paying their taxes and trying to help them, teach them and assist them with their questions, they instead harass them, prey that tax payers make a mistake so they can get more money from business owners and penalize them heavily for the slightest error. No wonder so many filipinos don’t pay taxes, i was shocked when i heard that before, but i can see why after doing business here. People are scared of the BIR and rightly so. Bir will not help you or assist you, but they will happily give you a huge fine for something as unimportant as a missing postcode on a invoice. I have many filipino friends who have been bankrupted by the BIR, they have a hugely complicated tax system and if you make a single error they will punish severely (financially).

    LET me make give you a real life example. Last year, i paid my UK business taxes myself, note in the uk you only have to do this once a year. I went online to the uk tax site. Logged in. Entered my income in one box. Entered my expenses in another box. The calculated my profits and tax due. I clicked pay now. I entered my credit card details and pay my tax bill. This took me 15 minutes. I don’t have to submit invoices, accounts, inventory. ANYTHING! i just need to enter my income and my expense!

    In the Philippines…. it took thousands of invoices, books of accounts, receipts, accountants, trips to BIR office to argue over every single little thing where the bir guy is sniffing for any error he can find, oh and queing up for hours… it takes weeks and we do this every quarter! Needless to say i wont be starting anymore businesses in the Philippines for now.

    On top of that, business owners in the philippines need to pay the mayor? (mayors permit), sss and all the other requirements you mentioned? These all take time, waiting around in hot offices, payment after payment and you haven’t even started trading yet! When you do business in the Philippines it feels as though you have become a government employee!

    I hope aquino continues to improve this, so far he is doing a good job. I hope he abolishes red tape. Makes paying taxes a pleasure and im not joking when i say this, in england, its actually a pleasure to pay my tax (ok not quite, i exagerated, but almost). Paying taxes should be easy and simple for small business owners e.g. you can do all of your accounts for 1 year in one day, without the help of an accountant. If you need an accountant to do your own business taxes it means the tax system is too complicated. If aquino made the BIR tax system payable online, with ease, i guarantee tax payments would go up through the roof, so many filipinos would happily pay their taxes. LIKE YOU SAID, filipinos WANT TO PAY THEIR TAXES, but they dont (many) because they’re scared of the BIR and put off by the endless roundabout of paperwork, payments, confusion and hassle.

    Small business owners and start ups SHOULD NOT need mayors permits and all these expensive permits. INSTEAD ALL START UPS should be exempt from all permits. Only when you reach a certain income should business owners need to register for all of these permits, even then the mayors permit is daylight robbery and until today i dont understant this permit/payment. Plus i have no idea where all that money goes, you loko around manila and everything looks like crap except for the privately owned areas like makati, the fort, ortigas.

  3. I have tried being a bookkeeper/admin assistant in a small business and the registration and renewal of the business is really time consuming. And most of the people also who are in charge with the processes are making your work longer by not attending your needs right away.

  4. I think the top reason is the last one mentioned. When someone says he wants to start a business, it’s common to hear from those around him that it’s risky, it’s uncertain and it’s not going to work because of competition, economy, capital, etc.

    Then of course, the tendency for the entrepreneur-wanna-be is he would just give up the idea and kick himself for saying such things. It really takes some guts to pursue the path of the few.

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